Disadvantages Of The Euro

The Euro and its Impact on the U.S. Economy The euro is the official currency of the following 12 European nations: Belgium, Germany, Greece, Spain, France, Luxembourg, Ireland, Italy, The Netherlands, Austria, Portugal, and Finland. Although it has been the official currency since January 1,1999 it became physical tender which can be used by all participating countries on January 1,2002. The introduction of the euro into the world was truly a historic event; it represented a unity never before seen in the history of Europe, a common currency. After years of negotiations and much skepticism from around the globe, the implementation of the euro is no longer an abstract ideal, but a change that nations, corporations, and investors must

Exchange rates play a pivotal role in the relationships between individual economies and the global economy. Almost all financial flows are processed through the exchange rate, as a result the movements and fluctuations of the exchange have a significant impact on international competitiveness, trade flows, investment decisions and many other factors within the economy. Due to the increasing globalisation of the world economy, trade and financial flows are becoming more accessible

The euro is the currency that is used by these European Union countries: Belgium, Greece, Cyprus, Spain, Germany, Italy, Ireland, Malta, Austria, Luxembourg, Finland, Portugal, the Netherlands, Slovenia, and France.

E the difference between countries in terms of product standards, and the difference between countries in

The European Union is not perfect. It has its own weaknesses and faults as well. Therefore, now I would like to write a short description about the mistakes of the monetary union. Then I put a question to all of us if the Eurozone, and especially the Euro, need to be reformed after the last years experiences. Finally – at the end of this subsection – I briefly summarize the negative effects of the crisis on the EU as a single currency area.

Fixed exchange rate: This is a type of monetary policy that tries to maintain a fixed rate of exchange with a foreign currency. In this type of monetary policy, the monetary authority declares a fixed exchange rate but do not trade with the currency to maintain the rate, leading to trade in the black market where the currency trades at its unofficial rate. The currency can also be bought by the monetary authority on a daily basis to achieve the target exchange rate. The degree on which the monetary policy becomes dependent on other nations depends on factors such as capital mobility, openness and other economic factors.

While the initial goals of the Euro made sense and were promising, there were definitely some issues associated with its creation. “The shift to a single currency meant that the individual member countries lost the ability to control monetary policy and interest rates in order to respond to national economic conditions” (Garcia). In other words, when Spain faces economic issues within their borders, they are unable to adjust the value of their currency in response to that. Thus, countries in the EU are completely in control of the economic policies they adapt,without facing the consequences of them. Additionally, because they all share a common currency, when a global crisis happens that affects the economies of various nations, no currency of any one member nation of the EU is able to escape its effects. This is what happened in response to the global financial crisis of the early twenty first century.

The Treaties of Rome which established the European Economic Community in 1957 announced that a Single European Market was the aim of the development which would accelerate prosperity and contribute to a closer union of the European nations. The Single European Act (1986) which launched the European Single Market programme and the Treaty of the European Union is based on this foundation. The treaties lead to the Economic and Monetary Union and are the cornerstones for the coherent currency. The third step towards the EMU began at the 1st January 1999, when the conversion rate was irresistibly locked in. From then on all the member states operated in a unitary monetary policy. The Euro was established as the legal means of payment and at first the eleven national currencies were reduced to subunits of the Euro. Greece joined the Euro system on 1st January 2001 and finally the European paper money and coinage were introduced to the 12 member states of the European Union on 1st January 2002. The introduction of the Euro presents a milestone on the way towards a united Europe in which the people, the public services and the assets have freedom of movement. The member states hoped to gain from the Monetary Union two kind of chances: On one hand it is supposed to present the motor for further political integration in Europe and on the other hand – in addition to the Single Market – it was expected to launch higher

The Euro, the second most used international currency, second most traded currency, and is in a third of foreign transactions, and amazingly the euro was developed in 1999. The euro was created by the EU's Economic and Monetary Union (EMU) in response to creating a unity between the EU Member States. The EMU has three main stages it passed through to achieve the single market for the EU. First stage was to establish the single market, second came the European Monetary Institute, and the final stage was

The viability of Euro as a common currency here will explicate the financial crisis in the Eurozone countries to prove that the EU has failed. Before World War II, doing trade across borders is difficult. Countries need to pay a fee to exchange currencies, before a tariff fee is then executed when trade between companies of two different countries are involved. This eventually had stifled the economic growth. After WWII has ended, the situation among the European countries is so dire that they have to call for a unification process in order to hasten the

An exchange rate tells you how much of one currency you can exchange for another. Generally, there are two types of exchange rate which is widely used by many countries: fixed and floating exchange rate. Nowadays, it is necessary to know what are their advantages as domestic currencies are essential to the method that economies run. But they are both not perfect. In 1973, with the collapse of the Bretton Woods system, countries that used fixed exchange rate were seriously affected and floating exchange rate rose afterward. However, there still had some debates on both fixed-rate and floating exchange rate. Especially after the Asian financial crisis in 1997, the debates became more intense. A fixed exchange rate once again favored by some countries. As we can see from the history, they have benefits and drawbacks. Each of them has their own characteristics. It is not possible to determine which exchange rate is better because the choice of the appropriate one may vary from different countries. In other words, the exchange rate regime changes along with the development of the international economic environment. That is why there are some different exchange rate regimes which lies between them in reality. Developing countries that have unstable economies and politics mostly use the fixed exchange rate to guarantee their residents a normal standard of living. On the other hand, developed countries such as the U.S, Great Britain are using floating exchange because

There are also chief drawbacks between the European Union and euro politically and economically. A risk that is involved in adopting the euro is that the monetary policy focus on the euro area. Once the euro has been adopted, the adjustments to the economic problems changes in a competitive position that need to be made via domestically and then set short term interest rates in the exchange rate. Some differences between countries will always exist so as long the markets are free to adjust to the changing of the economic conditions, country differentials should largely be of a transitory nature. The Monetary Union challenges the whole country when is relate it to individual citizens that have to adapt to a whole new monetary reference system. While this take time for older generations, who are used to what is cheap and expensive in the terms o f the old currency; its outstanding how fast the changeover goes to the younger generations. To conclude, a key challenge for all countries in the European Union lies in an open and transparent debate with the general public on the implications of euro are participation and also the necessary steps to the toward goal. Surveys show that there is a diminutive of citizens in the European Union Member States believe that adopting the euro will have a cocksure consequences for their countries. A small portion of people feel happy about the prospect of a future changeover.

The European Union is a union of 28 nations who “have relinquished part of their sovereignty to EU institutions” such as the European Parliament, European Council, and European Central Bank. Formed in 1993, the EU sought to further improve members’ economies and establish European free trade. In a deeper effort to unite, the EU also has an official currency that can be used throughout Europe. The currency, called the Euro, is used in 19 of the EU member states which make up the Eurozone. This currency assists in easier spending as it compliments the single market established by the Union.

The euro promotes trade and investment from global businesses outside the Eurozone which helps boost the European economy. Countries outside the Eurozone find the single currency an attractive quality to have in European countries to outsource their businesses in. Careful economic management within the EU makes the euro an attractive and strong currency. Having a single currency throughout almost all of Europe makes the euro more powerful in the global

2. The relative purchasing power parity condition holds that prices in different countries will different by roughly the same amount over time. This condition is based on the idea that differences in prices from one country to another reflect differences in underlying cost factors, access to inputs, taxation and other country-specific variables. Specially excluded in this condition is the exchange rate. Over time, the condition assumes, the movements of interest rates and exchange rates will mean that there is parity in the prices of goods between the two countries. The condition assumes therefore that any differences in prices can be explained in terms of non-currency country-specific factors. In the short run, there is no such assumption. This is because there is sometimes a time lag with respect to price changes. While currency exchanges rates and interest rates can change quickly, price changes can be slower for a number of reasons. Moreover, some of the inputs costs might change but again there is a time lag for these changes. The condition of relative purchasing power parity, therefore, is said to exist mainly in the long run.